Highlights from the President's budget

President Obama released his budget for the 2014 fiscal year on Wednesday, largely positioned as a “middle ground” between the tax increases in the Senate-passed budget and the spending cuts in the House-passed budget. The budget replaces the sequestration cuts beginning in 2014 and reduces the deficit by $1.8 trillion over 10 years. What follows are some of the main points of the budget that pertain to agriculture:

Overview of USDA:

Reduces the deficit by $38 billion (more than either the House or Senate’s 2012 Farm Bill drafts) by eliminating direct payments, decreasing crop insurance premium subsidies, and consolidating conservation programs

Eliminates funding to pay Brazil for cotton programs due to the loss of the WTO cotton case (as an attempt to get Congress to pass a new farm bill)

Overall USDA funding is at a relatively similar level to 2012 actual funding

Crop insurance:

Reduces the subsidy for producer premiums by 3 percentage points for policies where the government subsidizes more than 50 percent of the premium, which saves $4.2 billion over 10 years

Reduces the premium subsidy by 2 percentage points for revenue coverage that provides protection for upward price movements at harvest time, which saves $3.2 billion over 10 years

Includes language on reducing overhead and A&O expenses

Overall cut to crop insurance is $11.7 billion over 10 years

Reasoning: conducted study that determined that a 12 percent return on investment is necessary to sustain the crop insurance program, so these adjustments are to bring it down to 12 percent

Title I/Commodities

Ends direct payments to save $29.7 billion over 10 years

Expands the Dairy Gross Margin Insurance Program but doesn’t include much else in the way of clarity on dairy

Conservation:

Consolidates programs and reduces funding by $1.8 billion over 10 years while enrolling 23.6 million new acres overall

Targeting CRP acres coming out of the program

CSP capped at 12 million acres

Food aid:

Shifts $1.5 billion from the P.L 480 Title II Food for Peace program to USAID and cuts $500 million from the program, with a mandate that half of the remaining funds be used for distribution of domestically produced aid

The efficiencies gained from purchasing food locally/regionally will increase the number of people fed by 800,000, as well as help them get aid faster, in spite of the cut to funding

Food for Progress remains despite rumors of eliminating the program

NFU’s take: concerned that turning food aid into a cash-based or local purchase program could erode overall support for the funding since there’s no longer an agricultural constituency supporting the program

Permanently extends the Production Tax Credit for renewable energy production

Provides $9 million in discretionary funding for BCAP

No other funding for farm bill energy programs

Rural development:

$7 billion RUS expansion with focus on renewable energy

Reduces grants for water program and working with private sector to encourage investments to pick up the slack

Consolidates 6 programs (Rural Business Enterprise Grants, Rural Business Opportunity Grants, Rural Cooperative Development Grants, Small/Socially Disadvantaged Producer Grants, Rural Microenterprise Assistance Grants and Rural Community Development Initiative Grants) into one new grant program (called the Rural Business and Cooperative Grant Program) and cuts funding to a total of $55 million

NFU is concerned that USDA Cooperative Programs will be severely threatened by this consolidation

Research:

Creates new poultry research lab in Georgia

Increase in funding for the Agriculture and Food Research Initiative (AFRI), the competitive grants program, to $383.4 million

Provides $714 million for the completion of the National Bio- and Agro-Defense Facility in Manhattan, Kan.